PFS TwentyFour Monument Bond
"This fund invests in mortgage-backed securities, which offer a good alternative to traditional fixed income exposure for investors by giving access to highly rated debt with good returns," said Dance.
"The TwentyFour Monument Bond fund has the majority of its exposure in AAA and AA rated residential mortgage-backed securities."
"In April, the chancellor George Osborne announced changes to the way the Funding for Lending scheme would work."
"It has now been extended for an extra year, allowing banks to draw down cheap funding until the end of January 2015."
"As banks have access to this cheap lending, the need to securitise their mortgage transactions to raise funds is reduced and will further remove supply from the UK RMBS market."
"In the face of rising demand, this potentially pushes spreads tighter, supporting prices in the market."
"The team at TwentyFour Asset Management are accessible and help us to understand the components of the fund and structure of its holdings, which is particularly relevant in an asset class that has been unfairly tainted following the credit crunch."
"Lead manager Rob Ford has extensive experience in the asset-backed securities market and was involved in some of its first RMBS transactions in the 1980s."
The four crown-rated fund is yielding 3.06 per cent and has made 16.68 per cent since launch.
Its benchmark, the LIBOR GBP 3 months index, gained just 2.86 per cent over the same period, according to FE Analytics.
Performance of fund vs index since launch
Source: FE Analytics
It requires a minimum investment of £5,000 and has ongoing charges of 1.35 per cent.
RWC Enhanced Income
"Although they continue to grind higher for now, downside risks remain in equity markets," Dance said.
"These are: continued uncertainty in Europe, global growth falling short of expectations, geopolitical events or even profit-taking if markets tread water for any sustained period."
"Covered-call strategies can offer protection against market falls, as extra income is created by the fund writing call options on the normal holdings in the fund."
"RWC Enhanced Income has delivered this downside protection, that's what we want from this kind of strategy.”
"When the market fell 11 per cent last year between March 19 and June 1, the fund only fell 5 per cent."
Since launch in October 2010, the £167.9m fund has made 9.07 per cent, lagging the FTSE All Share, which is up 27.99 per cent.
"The RWC Enhanced Income fund was launched in 2010 by the managers that previously ran the Schroders Income Maximiser fund," Dance said.
"The process has evolved since they have been at Schroders. The strategy now is to deliver a smooth stream of income to investors by lowering the volatility of the fund."
"At Schroders, they had a more deep-value bias, which they concluded was associated with higher levels of volatility."
"The fund seeks out stocks that have a history of delivering a high return on equity and a high proportion of profits in cash."
"The fund also has the flexibility to not only write call options, but also buy put options."
"This gives it the ability to sell stocks at an agreed price in the future and therefore provides additional protection in times of market distress."
It requires a minimum investment of £25,000 and has ongoing charges of 1.85 per cent.
Smith & Williamson MM Cautious Growth
"This fund, run by head of the multi-manager team James Burns, has a lot of similarities, holdings- and strategy-wise, with the low-volatility portfolios that we run for clients," Dance continued.
"It has a large weighting to zeros [zero-dividend preference shares], which are generally issued by different types of investment trusts."
"Typically, zeros have a relatively low level of volatility. This is due to their defined returns and relatively short-dated nature, yet yields in the market are attractive versus other bonds."
"The transparency of an investment trust allows us to see whether the investor will get the redemption price at maturity, effectively assessing the quality of the issuers."
"We can also look at the behaviour of the trust such as NAV movement and compare it to metrics such as cover ratios and hurdle rates."
"These zeros sit alongside other investments that have a defined return, like structured products and synthetic zeros."
"Such investments make up roughly half of the portfolio, whilst the other half offers more variable returns."
"One example is long-term holding BH Global, the listed multi-strategy hedge fund, and other tactical trades such as investment trusts in wind-down, trading at a discount to NAV."
Over the last decade, the cautious portfolio has gained 85.32 per cent.
The five crown-rated fund requires a minimum investment of £1,000 and has ongoing charges of 1.25 per cent.
JO Hambro UK Dynamic
"This fund is run by Alex Savvides, who also co-manages the JOHCM UK Growth fund," Dance said.
"We believe he will be one of tomorrow’s stars of the fund management industry. Alex looks for stocks where he believes the market has underestimated or undervalued future revenue or cash generation."
"His philosophy and valuation technique is similar to our own, favouring cash generation rather than focusing solely on accounting earnings."
"We would describe his style as a balance of value investing and growth at a reasonable price, but he always looks for a catalyst to unlock hidden value."
"Like us, he believes in a conviction approach with a fairly concentrated portfolio, typically running 40 to 60 stocks in the fund."
"His process translates into consistent performance with the approach working in different market conditions."
"By buying companies that are cash-generative, these companies are generally more resilient in an environment of equity market falls, while the growth element of his portfolio allows him to participate in rallies."
"Although there may be slightly more recovery stories in the fund, there is a high degree of replication versus our own direct stock portfolios and so it makes perfect sense for our clients that do not hold direct equities."
Since launch, the fund has made 82.9 per cent, more than double the returns of both the IMA UK All Companies sector and the FTSE All Share.
Performance of fund vs sector and index since launch
Source: FE Analytics
The portfolio requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.5 per cent.
Templeton Frontier Markets
"Valuations look quite stretched in developed equity markets and so it seems necessary to look further afield to other markets for returns," Dance said.
"We invested in the Templeton Frontier fund to give us access to these 'emerging' emerging markets: frontier markets, such as Nigeria, Kazakhstan, Vietnam, and the developing Arab nations."
"These economies cannot be overlooked with their attractive growth profiles, as domestic demand fuels industry development and spurs on growth, and cheap valuations with under 8x price/earnings ratios."
"Looking at the Templeton Frontier Markets fund, the holdings profile has an average price to earnings of 7.2x and a cash-flow yield of more than 20 per cent."
"We have a bias to companies that are cash-generative and so the fund fits with our process."
"Mark Mobius’s experience in the emerging markets space gives us faith in his conviction and understanding of these markets."
"There is a need to understand the political dynamics of these markets when investing in these 'riskier' frontier markets," he added.
The four crown-rated fund has performed in line with the MSCI Frontier Markets index over one and three years. It requires a minimum investment of £5,000 and has comparatively high ongoing charges of 2.57 per cent.